Munich Personal RePEc Archive
The Trade-off between Fertility and Education: Evidence from the Korean Development Path
Jun, Bogang
23 January 2013
Online at https://mpra.ub.uni-muenchen.de/43971/
MPRA Paper No. 43971, posted 24 Jan 2013 03:34 UTC
The$ Trade(off$ between$ Fertility$ and$ Education:$ Evidence$ from$ the$ Korean$
Development$Path$
!
Bogang$Jun$
!
Abstract!!
Unified! Growth! Theory! suggests! the! demographic! transition! and! the! associated! rise! in!
human! capital! formation! were! critical! forces! in! the! transition! from! Malthusian!
stagnation! to! modern! economic! growth.! This! paper! provides! empirical! evidence! in!
support! of! this! hypothesis! based! on! the! development! process! in! Korea.! Exploiting!
variations!in!fertility!in!human!capital!formation!across!regions!in!Korea!over!the!period!
1970! to! 2010,! the! study! establishes! that! the! process! of! development! in! Korea! was!
associated!with!a!reduction!in!child!quantity!and!increase!child!quality.!!
!
Keywords$Demographic!transition,!QuantityHquality!tradeHoff,!Unified!Growth!Theory$
JEL$Classification$I25,!J13,!N15!
Bogang!Jun!
Technology!Management,!Economics,!and!Policy!Program,!Seoul!National!University,!
Building!37,!GwanakHgu,!Seoul,!151746,!South!Korea!EHmail:!bogang33@gmail.com!
Acknowledgement$I!am!grateful!to!Oded!Galor!for!valuable!comments.!Comments!from!
the!attendees!of!my!presentation!at!Brown!University!are!also!gratefully!acknowledged.!
1.$Introduction$
!
Unified! Growth! theory! (UGT)! suggests! the! demographic! transition! and! the!
associated! rise! in! human! capital! formation! were! critical! forces! in! the! transition! of! the!
world! economy! from! Malthusian! stagnation! to! modern! economic! growth.! ! The! rise! in!
the! demand! for! human! capital! in! the! course! of! industrialization! induced! parents! to!
increase!their!children’s!level!of!education!and!thus!to!reduce!their!fertility!rate!(Galor,!
2011,!Galor!and!Weil,!2000).!
!Empirical! studies! of! UGT! have! focused! primarily! on! the! slow! transition! of!
Western! Europe! and! its! offshoots! from! the! Malthusian! epoch! to! the! modern! growth!
regime,! abstracting! from! the! important! and! more! rapid! transition! process! of! the!
underdeveloped! regions! in! Asia! and! African.! ! This! paper! focuses! on! these! important!
regions! and! establishes! that! the! demographic! transition! and! the! associated! quantityH quality! tradeHoff! was! indeed! an! important! component! of! Korea’s! transition! from! an!
underdeveloped! economy! in! the! 1970s! to! an! advanced! economy! in! the! subsequent!
decades.!!!
As! depicted! in! Figure! 1! Korea! transition! from! an! underdeveloped! country! into!
an! advanced! economy! was! associated! with! a! demographic! transition.! ! The! quantityH quality! tradeHoff! played! a! critical! role! in! this! transition! from! a! Malthusian! regime! to! a!
modern! economy! in! Korea,! and! thus,! it! is! likely! to! be! a! significant! part! of! the!
development!process!of!other!underdeveloped!countries!as!well.!!
! Figure$1!The!trend!of!Education,!CBR!and!GDP!per!capita!
Source:!Korean!Population!and!Housing!Census!and!Education!Statistics!
0!
0.1!
0.2!
0.3!
0.4!
0.5!
0.6!
0.7!
0.8!
0.9!
0.0!!
5.0!!
10.0!!
15.0!!
20.0!!
25.0!!
30.0!!
35.0!!
1970!! 1972!! 1974!! 1976!! 1978!! 1980!! 1982!! 1984!! 1986!! 1988!! 1990!! 1992!! 1994!! 1996!! 1998!! 2000!! 2002!! 2004!! 2006!! 2008!! 2010!!
crude!birth!rate(per!1000)!
per!capita!GDP!(1000!dollar,nominal,!2005)!!
education!
!
Recent! research! established! the! importance! of! the! quantityHquality! tradeHoff! in!
the! transition! from! stagnation! to! growth! across! a! wide! range! of! European! societies! in!
the! nineteenth! century! using! a! variety! of! identification! strategies.! In! particular,! it! was!
found! to! be! present! in! Prussia! (Becker! et! al.,! 2010),! England! (Klemp! and! Weisdorf,!
2011),!Ireland!(Fernihough,!2011),!France!(Murphy,!2010),!and!Spain!(Basso,!2012)!.!
I!analyze!panel!data!on!fertility!and!school!enrollment!rates!covering!11!regions!
and!10!time!points,!reflecting!5Hyear!time!internal!over!the!period!1970H2010.!I!use!the!
high!school!enrollment!rate,!defined!as!the!number!of!high!school!students!per!person!
aged!15–19,!to!reflect!children’s!education,!and!the!Crude!Birth!Rate!(CBR),!which!is!the!
number! of! births! per! 1,000! people! per! year,! to! measure! parent’s! fertility.! ! As! will!
become!apparent,!although!the!Korean!government’s!fertility!control!policy!commenced!
in!1961!contributed!to!the!decline!in!fertility!over!this!period,!regional!variations!allow!
us!to!capture!the!relationship!between!fertility!and!education.!!
The!empirical!analysis!in!this!paper!is!performed!using!a!firstHorder!differencing!
model.!I!control!for!unobserved!factors!at!the!regional!level!that!may!affect!both!fertility!
and! education.! The! panel! data! also! allow! us! to! control! for! regional! and! national! time!
trends.! The! empirical! results,! consistent! with! UGT,! show! a! significant! negative!
relationship!between!children’s!education!and!parent’s!fertility,!implying!that!there!was!
a! quantityHquality! tradeHoff! in! Korean! development.! These! results! are! robust! to! using!
alternative!measures!of!fertility!and!lagged!variables.!!
The! remainder! of! this! paper! proceeds! as! follows.! Section! 2! presents! the!
theoretical! background! and! related! literature.! Section! 3! shows! the! empirical! analysis!
and!the!results.!Finally,!section!4!gives!concluding!remarks.!!
!
2.$Theoretical$background$and$related$literature$
$
! A!demographic!transition,!accompanied!by!decreasing!fertility!and!a!decreasing!
population! growth! rate,! is! crucial! for! escaping! the! Malthusian! trap! and! entering! a!
modern! growth! regime.! If! this! demographic! transition! did! not! occur,! the! increasing!
output! resulting! from! technological! progress! would! be! canceled! out! by! an! increasing!
population,!and!GDP!per!capita!would!remain!stagnant.!The!first!demographic!transition!
occurred! in! Western! Europe! in! the! late! nineteenth! century! and! created! sustained!
economic! benefits! from! the! Industrial! Revolution,! which! began! in! the! late! eighteenth!
century.!!
The! gap! between! the! beginning! of! the! Industrial! Revolution! in! the! late!
eighteenth! century! and! the! demographic! transition! in! the! late! nineteenth! century! has!
several!possible!explanations.!Becker!et!al.!(1960)!and!Becker!and!Lewis!(1973)!argue!
that! increasing! income! from! the! Industrial! Revolution! caused! decreasing! fertility!
because! of! the! opportunity! cost! of! raising! children.! Child! quality! has! a! higher! income!
elasticity!than!does!child!quantity,!creating!the!quantityHquality!tradeHoff.!This!argument,!
however,! cannot! explain! the! historical! fact! that! the! demographic! transition! occurred!
simultaneously! in! the! most! of! Western! Europe! despite! an! income! gap! between! the!
countries.!Moreover,!to!make!this!argument,!they!postulate!that!all!individuals!have!the!
same! preferences! over! the! quality! and! quantity! of! their! children,! an! assumption! that!
potentially!contains!bias!(Galor,!2011).!
! Demographers! also! argue! that! falling! infant! and! child! mortality! prior! to! the!
change!in!fertility!was!the!major!cause!of!the!demographic!transition.!According!to!this!
argument,!because!parents!care!about!their!number!of!surviving!children,!lower!infant!
and! child! mortality! implies! that! more! children! survive,! and! thus,! parents! give! birth! to!
fewer! children.! Doepke! (2005),! however,! shows! empirically! that! an! additional! factor!
besides!the!change!in!infant!and!child!mortality!is!necessary!to!explain!the!change!in!the!
net! reproduction! rate.! Murphy! (2010)! also! shows! that! decreasing! infant! mortality! has!
no!effect!on!decreasing!fertility!through!empirical!research!on!French!data.!!
! As!another!alternative,!Caldwell!(1976)!and!Morand!(1999)!construct!a!different!
household! utility! function! based! on! the! oldHageHsupport! model! and! try! to! explain! the!
demographic! transition! using! this! utility! function! rather! than! one! based! on! parental!
altruism.! In! their! argument,! children! are! an! investment! good! for! their! parents! in! the!
absence! of! a! financial! market.! In! the! modern! era,! with! developed! financial! markets,!
parents!have!fewer!children!because!they!have!other!ways!of!investing!for!old!age.!Their!
argument,! however,! is! not! logical! considering! the! fact! that! the! young! of! all! natural!
species! seldom! care! for! their! parents.! Furthermore,! financial! institutions! that! provide!
insurance! for! old! age! existed! before! the! timing! of! the! demographic! transition,! which!
does! not! support! their! argument! (Hindle,! 2004;! Pelling! and! Smith,! 1994).! Moreover,!
although!the!rich!have!more!access!to!financial!intermediaries,!they!do!not!tend!to!have!
fewer! babies! than! the! poor! do.! Therefore,! the! oldHage! security! hypothesis! is! not!
sufficient!to!explain!the!demographic!transition.!!
! Galor! and! Weil! (1999,! 2000),! Galor! and! Moav! (2002,! 2004),! and! Galor! (2011)!
suggest! that! technological! progress! due! to! the! Industrial! Revolution! increased! the!
demand! for! human! capital.! This! increasing! demand! accelerated! in! the! late! nineteenth!
century,!driving!parents!to!decrease!their!fertility!and!increase!their!children’s!level!of!
education.! That! is,! they! made! the! quantityHquality! tradeHoff.! Accelerating! technological!
progress,! accompanied! by! increasing! parental! income,! affected! the! rate! of! population!
growth! in! two! ways.! First,! increasing! parental! income! released! the! parental! budget!
constraint,! making! room! for! investment! in! both! the! quality! and! quantity! of! children.!
Second,!increasing!technology!led!parents!to!reallocate!their!budget!toward!investments!
in! their! children’s! quality! rather! than! their! quantity.! This! process! created! a! virtuous!
cycle! in! that! technological! progress! increased! demand! for! human! capital,! which!
promoted! further! technological! progress,! which! encouraged! still! more! human! capital,!
which!promoted!parental!investment!in!children’s!quality!and!a!decreasing!fertility!rate.!
Thus,!the!economy!was!released!from!the!Malthusian!trap!and!achieved!modern!growth.!!
Empirical! evidence! for! the! qualityHquantity! tradeHoff! continues! to! accumulate.!
Klemp!and!Weisdorf!(2011)!show!that!there!was!a!quantityHquality!tradeHoff!during!the!
Industrial! Revolution! in! England! by! using! data! from! Anglican! parish! registers! over! c.!
1700–1830.! Murphy! (2010)! also! gives! evidence! for! a! quantityHquality! tradeHoff! in!
France! by! using! data! from! 1876! to! 1896.! He! shows! that! neither! republicanism! nor!
political! participation! during! the! French! Revolution! had! a! significant! effect! on! fertility,!
whereas! the! proportion! of! children! in! school! did,! implying! that! the! quantityHquality!
tradeHoff! along! with! cultural! factors! played! a! significant! role! in! decreasing! fertility.!
Moreover,!he!shows!that!financial!development!has!a!slightly!negative!effect!on!fertility,!
providing! weak! evidence! for! the! oldHageHsecurity! hypothesis.! Becker! et! al.! (2010)!
demonstrate! a! quantityHquality! tradeHoff! in! nineteenth! century! Prussia! even! before!
industrialization,!by!using!inequality!in!landownership!and!the!distance!to!Wittenberg,!
where!Luther!delivered!a!sermon!that!every!Christian!should!able!to!read!the!Bible,!as!
instrumental! variables.! They! find! that! education! preferences! have! a! significant!
relationship! with! fertility.! Fernihough! (2011)! compares! two! Irish! cities,! Belfast! and!
Dublin,!by!using! a! data! set! of! Irish! families! from! 1911,!and! confirms! the! existence! of! a!
quantityHquality! tradeHoff,! particularly! in! industrialized! cities.! Basso! (2012)! also!
presents!the!negative!and!causal!effect!of!children’s!education!on!parent’s!fertility!using!
Spanish!provincial!level!data!in!the!early!twentieth!century.!!
! Most! of! this! study! considers! western! industrialized! countries,! which! achieved!
industrialization!in!the!nineteenth!century.!However,!an!increasing!demand!for!human!
capital,! along! with! industrialization! and! the! quantityHquality! tradeHoff,! may! have! also!
played!an!important!role!in!the!development!paths!of!twentieth!century!Asian!countries.!
This! question! is! important! because! if! these! countries,! which! achieved! industrialization!
later,!followed!a!growth!path!similar!to!that!of!western!countries,!which!were!leaders!in!
terms! of! economic! development,! we! could! give! a! meaningful! blueprint! for! economic!
growth!to!countries!still!caught!in!the!Malthusian!trap.!!
! Bloom!and!Williamson!(1997)!have!previously!mentioned!that!the!demographic!
transition! and! its! cohort! effect! are! major! factors! in! the! Asian! economic! miracle,!
including! Korean! economic! achievement.! They! argue! that! the! demographic! transition!
resulted! in! a! growing! working! age! population! from! 1965! to! 1990,! temporarily!
expanding! per! capita! productivity.! However,! they! do! not! consider! the! relationship!
between!the!decreasing!quantity!of!children!and!the!increasing!quality.!Doepke!(2004)!
also! describes! the! fertility! transition! in! the! middle! of! the! twentieth! century! in! Korea,!
analyzing!the!effect!of!human!capital!policies.!He!shows!that!education!reform!and!child!
labor!regulation!played!an!important!role!in!the!demographic!transition!and!in!Korea’s!
growth!because!these!policies!lowered!the!opportunity!cost!of!education.!He!also!points!
out!that!the!share!of!skilled!labor!increased!from!5%!in!1950!to!70%!in!2000.!None!of!
these! papers,! however,! have! demonstrated! a! quantityHquality! tradeHoff! in! Korea.! Thus,!
to! capture! the! link! between! the! demographic! transition,! increasing! income! per! capita,!
and!increasing!share!of!skilled!labor,!I!must!show!that!such!a!tradeHoff!exists.!!
To! do! so,! I! use! the! quantityHquality! framework! described! above! to! derive! a!
simple! model! explaining! this! tradeHoff! in! the! spirit! of! Galor! (2012).! Suppose! the!
household’s! utility! function! is! based! on! altruism! and! consists! of! consumption,! c,! the!
number!of!(surviving)!children,!n,!and!the!human!capital!of!each!child,!h.!!
! !!!!! (1)!
where! and! are! constant! parameters.! Here,! is! the! preference! for!
education.!!
Then,! the! unit! cost! of! raising! a! child! with! education! level! !is! ,! where!
is! the! fraction! of! the! household’s! unitHtime! endowment! needed! to! raise! a! child! and!
is! the! fraction! of! the! household’s! unitHtime! endowment! needed! to! give! their! child!
education!level! .!!
Suppose! also! that! the! household’s! budget! constraint! is! one! unit! of! time.! If! the!
household! uses! its! entire! budget! to! earn! income,! its! labor! wage! will! be! y,! which! is!
allocated!toward!parental!consumption!and!the!cost!of!raising!children.!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(2)!
Suppose!that!an!individual’s!accumulated!human!capital!depends!on!his!level!of!
education! and! his! technological! environment.! If! technology! changes! rapidly,! existing!
human! capital! will! become! less! adaptable,! but! education! can! improve! its! adaptability.!
u = (1− γ )ln c + γ [ln n + β ln h ]
0<γ <10 < β < 1 β
e
τ
q+ τ
ee τ
qτ
ee
yn(
τ
q+τ
ee)+c≤yThus,!the!time!needed!to!learn!new!technology!is!shorter!when!the!level!of!education!is!
high! or! when! the! speed! of! technological! change! is! slow.! Therefore,! a! child’s! level! of!
human!capital,! ,!is!a!function!of!his!education!and!the!technological!environment.!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(3)!
where! is! the! rate! of! technological! progress! and! !is! an! increasing,! strictly! concave!
function!of! !and!a!decreasing,!strictly!convex!function!of! .!
Then,! I! can! determine! the! optimal! quantity! and! quality! of! children! by! adding!
some!assumptions!on! !to!ensure!an!interior!solution.!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(4)!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(5)!!
! Given! the! parameters! of! the! economy! ,! I! can! determine! the!
household’s!optimal!quantity!and!quality!of!children!as!follows.!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(6)!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(7)!
Equations!(4)!and!(7)!show!the!negative!relationship!between!the!quantity!and!quality!
of!children.!This!quantityHquality!tradeHoff!depends!on!the!cost!of!child!rearing,!the!cost!
of!education,!the!household’s!preference!for!education ,!and!the!rate!of!technological!
progress! .!!
!
3.$Empirical$Analysis$
$
1)!Data!Description!
!
For! the! analysis,! I! use! data! from! the! Korean! Population! and! Housing! Census! of!
1966–2010.! The! Census! has! collected! demographic,! educational,! and! economic!
information! for! every! Korean! person! every! 5! years! since! 1925.! I! also! use! data! from!
Education!Statistics,!which!has!collected!information!about!every!educational!institution,!
including!preschools,!elementary!schools,!middle!schools,!every!kind!of!high!school,!and!
colleges,! graduate! schools,! and! other! advanced! education! institutions! every! year! since!
1963.! From! these! data! sets,! I! create! a! panel! covering! 11! regions! and! 10! time! points!
(1970–2010,!every!5!years).!
Fertility,! ,! is! measured! as! the! crude! birth! rate! (CBR),! which! is! the!
number!of!births!per!1,000!people!per!year,!in!province!i!in!period!t.!
h
h = h ( e, g )
g h
e g
h
n=
γ
/ (τ
q+τ
ee)τ
eh(e,g)=β
he(e,g)(τ
q+τ
ee)(g,β,τe,τq)
e=e(g,
β
,τ
e,τ
q) n=γ
/ [τ
q+τ
ee(g,β
,τ
e,τ
q)]β
gFertilityi,t
The! level! of! education,! ,! is! measured! as! the! high! school! student!
ratio,! defined! as! the! number! of! high! school! students! divided! by! the! number! of! people!
aged!15–19!who!are!eligible!for!high!school!in!province!i!in!period!t.!The!actual!rate!may!
be! higher! than! the! computed! rate! because! the! population! aged! 15–19! includes! some!
middle! school! students! as! well.! This! computed! enrollment! rate! varied! regionally! from!
15%!to!25%!in!1970!and!from!53%!to!60%!in!2010.!Most!of!this!variation!stems!from!
the! variation! in! human! capital! demand! across! regions! and! time.! The! high! school!
enrollment! rate! is! more! appropriate! than! the! primary! school! enrollment! rate! for! this!
analysis,! because! after! the! education! reform! in! 1950,! every! Korean! was! required! to!
enter!into!primary!school,!so!the!gross!primary!school!enrollment!rate!was!already!over!
100%! by! the! 1980s.! The! high! school! enrollment! rate! is! also! more! appropriate! for! this!
study!than!is!the!college!enrollment!rate,!because!regional!mobility!for!entering!college!
is!extremely!high.!
The!control!variables! in!the!model!are!the!share!of!married! women,!defined!as!
the!number!of!married!women!aged!15–44!divided!by!the!total!number!of!women!aged!
15–44!in!province!i!in!period!t;!the!share!of!agriculture,!defined!as!the!number!of!people!
making! a! living! from! agriculture,! forestry,! and! fisheries! divided! by! the! number! of!
employed!people!in!province!i!in!period!t;!and!the!level!of!urbanization,!defined!as!the!
number!of!people!employed!in!the!service!sector!divided!by!the!population!of!province!i!
in!period!t.!Table!1!provides!the!summary!statistics!of!the!variables.!!
!
(Insert!Table!1!here)!
!
2)!Empirical!Specification:!FirstHDifferencing!Model!
!
The! empirical! analysis! examines! the! effect! of! education! on! fertility.! I! use! the!
following!empirical!specification.!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(8)!
where! the! s! are! vectors! of! the! control! variables! described! above.! This! formula!
captures! the! fact! that! the! current! economic,! social,! and! educational! conditions! affect! a!
household’s!fertility!decisions.!
! There!could!be!some!unobserved!factors!that!are!correlated!with!education!and!
affect!fertility!at!the!province!level.!Such!factors!would!threaten!a!causal!interpretation!
of!the!results.!To!solve!this!problem,!I!control!for!regional!fixed!effects,!which!represent!
timeHinvariant!unobserved!heterogeneity!across!the!provinces!in!fertility,! ,!where,!!
Education
i,t
Fertilityi,t =β0+β1Educationi,t+ΒΧi,t+υi,t Χ
η
i!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(9)!
The!choice!between!a!fixed!effects!model!and!a!first!differencing!model!depends!on!the!
assumptions! about! the! idiosyncratic! error,
! .! If! there! is! autocorrelation! in! !and! no!
serial!correlation!in! ,!the!estimator!from!the!first!differencing!model!will!be!more!
efficient.! To! test! the! autocorrelation! in! ,! I! perform! the! Wooldridge! test! for!
autocorrelation!with!a!null!hypothesis!of!no!firstHorder!autocorrelation!and!obtain!a!pH value! of! 0.0006,! which! is! much! less! than! 0.01.! This! result! implies! that! there! is! no!
autocorrelation! in! ,! and! the! first! differencing! model! is! appropriate! in! this! context.!
Therefore,! I! examine! the! first! difference! of! equation! (8)! and! estimate! the! effect! of!
changes!in!education!on!changes!in!fertility.!
Moreover,! there! could! be! unobserved! factors! at! the! province! level! that! affect!
both! changes! in! education! and! changes! in! fertility.! To! remove! this! problem,! I! consider!
the! linear! unobserved! heterogeneity! across! the! provinces! in! the! fertility! time! trend!
using! a! province! fixed! effect.! These! empirical! strategies! mean! that! I! am! assuming! that!
there! is! no! correlation! between! changes! in! the! explanatory! variables! and! those! in! the!
error!term,!whereas!the!levels!of!the!explanatory!variables!could!be!correlated!with!the!
error!term.!!
If! there! are! no! time! constant! explanatory! variables,! then! I! can! estimate! the!
partial!effects!even!in!the!presence!of!omitted!variables,!which!could!be!correlated!with!
the! explanatory! variables,! by! considering! the! time! invariant! fixed! effect! in! the! error!
term! (Wooldridge,! 2010).! None! of! the! explanatory! variables! in! this! paper! are! timeH constant!variables!such!as!the!geographical!characteristics!of!each!province.!Therefore,!I!
can!capture!the!partial!effect!of!education!on!fertility!when!controlling!for!regional!fixed!
effects!even!if!there!are!omitted!variables.!
! I!consider!the!timeHinvariant!unobserved!heterogeneity!across!the!provinces!in!
fertility,! ,! variations! in! the! time! effect! at! the! national! level,! ,! and! the! linear!
unobserved!heterogeneity!across!provinces!in!the!fertility!time!trend,! .!That!is!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(10)!
! Then,!the!first!differencing!model!is!
!!!!!!!!!!!!!!!!!!!!!!!!(11)!
where! ,!
and! ,!which!are!calculated!at!
every!fiveHyear!interval!between!1970!and!2010.!The!lag!operator,! ,!is!applied!to!the!
υ
i,t= η
i+ e
i,t
e
i,t
e
i,t
Δ e
i,t
e
i,tΔ e
i,t
ηi δt
θit
υi,t =ηi+δt+θit+εi,t
ΔFertilityi,t =Δβ1Educationi,t +ΔΒΧi,t+Δδt+θi+Δεi,t ΔFertilityi,t ≡Fertilityi,t+1−Fertilityi,t
ΔEducation
i,t ≡Education
i,t+1−Education
i,t
Δδ
t≡ δ
t+1
− δ
t Δother!variables!in!vector! .!Given!this!changed!empirical!specification,!I!have!88!
observations!across!11!provinces.!
!
! Figure$2!Change!in!CBR!and!change!in!the!education!
Source:!Korean!Population!and!Housing!Census!and!Education!Statistics!
!
The! negative! correlation! between! the! change! in! the! CBR! and! the! change! in!
education!is!apparent!in!Figure!2!and!is!shown!in!the!fitted!values!plotted!from!an!OLS!
regression.!
!
(Insert!Table!2!here)!
!
Table!2!depicts!the!results!of!these!estimates!from!1970!to!2010!in!columns!(1)H (11).!The!change!in!education!has!a!negative!and!highly!significant!effect!on!the!change!
in!the!CBR!when!controlling!for!regional!fixed!effects!only!(column!(1)),!controlling!for!
regional!fixed!effects!and!national!time!trends!(column!(2)),!and!controlling!for!regional!
fixed!effects!and!regional!time!trends!(column!(7)).!Moreover,!when!controlling!for!the!
change!in!married!woman,!the!change!in!share!of!agriculture,!and!the!change!in!share!of!
urban,!the!highly!significant!effect!of!the!change!in!education!on!the!change!in!the!CBR!
holds.!As!one!would!expect,!columns!(3)!and!(8)!present!a!positive!effect!of!the!change!
Χ
H12!
H10!
H8!
H6!
H4!
H2!
0!
2!
4!
H0.05! 0! 0.05! 0.1! 0.15! 0.2!
Change$in$CBR$
Change$in$education$
in!married!woman!on!the!change!in!the!CBR!and!a!negative!and!highly!significant!effect!
of!the!change!in!education!on!the!change!in!the!CBR.!!
!
! Figure$3!The!share!of!agriculture!and!CBR!
Source:!Korean!Population!and!Housing!Census!!
!
Contrary! to! my! expectation,! columns! (4)! and! (9)! present! a! negative! but!
insignificant!effect!of!the!change!in!the!share!of!agriculture!on!the!change!in!the!CBR.!As!
depicted! in! Figure! 3,! the! relationship! between! the! share! of! agriculture! and! the! CBR! is!
apparently! positive,! but! when! controlling! for! regional! fixed! effects,! a! national! time!
trend,!and!regional!linear!time!trends,!the!causal!effect!disappears.!In!columns!(5)!and!
(10),!I!observe!the!negative!and!significant!effect!of!the!change!in!the!share!of!urban!on!
the!change!in!the!CBR.!These!results!are!reasonable!because!the!share!of!urban,!which!
measures! the! share! of! humanHcapitalHdemanding! occupations,! should! encourage!
decreasing!fertility.!However,!the!significant!effect!disappears!when!controlling!for!the!
regional!time!trend.!!
!
(Insert!Table!3!here)!!
(Insert!Table!4!here)!
!
0!
5!
10!
15!
20!
25!
30!
35!
40!
0! 0.1! 0.2! 0.3! 0.4! 0.5! 0.6! 0.7! 0.8!
CBR$
the$share$of$agriculture$
Table!3!depicts!the!effect!of!the!change!in!education!on!the!change!in!the!CBR!for!
the!years!1970H1990.!As!Figure!1!shows,!the!CBR!and!the!education!level!were!stagnant!
over!the!late!1980s!and!early!1990s!and!changed!again!after!the!late!1990s.!In!the!1970s!
and!1980s,!the!Korean!economy!transitioned!from!a!Malthusian!agricultural!economy!to!
a!modern!industrialized!economy.!As!Young!(1995)!argues,!from!the!1960s!to!the!1990s,!
84!percent!of!Korean!output!growth!could!be!explained!by!factor!accumulation,!which!is!
one!of!the!characteristics!of!the!transition!period!from!a!Malthusian!to!a!modern!growth!
economy,! while! only! 7! percent! of! Korean! output! growth! was! explained! human! capital!
accumulation,! which! is! one! of! the! driving! forces! of! modern! growth.! Singh! et! al.! (1996)!
also! shows! that! the! driving! force! of! growth! transitioned! from! factor! accumulation! to!
TFP! growth! after! the! 1980s.! Thus,! the! Korean! growth! regime! has! experienced! a! phase!
change! since! the! 1990s,! and! human! capital! has! become! a! prime! engine! of! growth.!
Because!the!quantityHquality!tradeHoff!is!particularly!important!in!the!transition,!to!test!
whether! it! existed! during! the! transition! period,! I! examine! just! the! period! from! 1970H 1990!and!find!that!the!highly!significant!effect!of!the!change!in!education!on!the!change!
in!the!CBR!holds!in!every!case,!as!in!Table!2.!!
Table!4!presents!the!results!for!the!years!1990–2010.!In!this!case,!the!absolute!
value!of!the!coefficient!representing!the!negative!effect!of!the!change!in!education!on!the!
change!in!the!CBR!decreases!as!compared!to!the!results!for!1970–1990.!Moreover,!the!
significance! disappears! when! controlling! for! the! regional! time! trend.! This! means! that!
the!quantityHquality!tradeHoff!observed!in!the!transition!from!a!Malthusian!regime!to!a!
modern!growth!regime!occurred!in!Korea!from!1970!to!1990.!!
!
(Insert!Table!5)!!
!
To! check! the! robustness! of! the! above! results,! I! measure! fertility! as! the! childH woman! ratio,! defined! as! the! number! of! children! aged! 0–4! per! each! woman! of! child!
bearing! age! (15–44),! which! is! used! in! Becker! et! al.! (2010),! as! depicted! in! Table! 5.! The!
highly!significant!effect!of!the!change!in!education!on!the!change!in!fertility!holds.!!
I! further! test! robustness! using! the! following! empirical! specification! to! capture!
lags! in! fertility! changes! with! respect! to! current! economic,! social,! and! educational!
conditions.!!
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!(12)!
where!the!period!of!observation!is!five!years,!so!when!t!is!1975,!tH1!is!1970,!and!so!on!
through!2010.!!
Fertilityi,t =β0+β1Educationi,t−1+ΒΧi,t−1+υi,t
! In!the!same!way,!I!try!to!control!for!timeHinvariant!unobserved!heterogeneity!in!
fertility!across!provinces,! ;!variations!in!the!time!effect!at!the!national!level,! ;!and!
linear!unobserved!heterogeneity!in!the!time!trend!of!fertility!across!provinces,! .!Then,!
the!first!differencing!model!is:!
ΔFertilityi,t =Δβ1Educationi,t−1+ΔΒΧi,t−1+Δδt−1+θi+Δεi,t!!!!!!!!!!!!!!!!!!!!(13)!
where! !
and! ,!which!are!calculated!
at!every!fiveHyear!interval!between!1970!and!2010!
The!negative!correlation!between!the!change!in!the!CBR!and!the!lagged!change!
in! education! is! apparent! in! Figure! 4! and! is! shown! in! the! fitted! values! plotted! from! an!
OLS!regression.!!
!
! Figure$4!Change!in!CBR!and!lagged!change!in!the!education!
Source:!Korean!Population!and!Housing!Census!and!Education!Statistics!
!
(Insert!Table!6!here)!
(Insert!Table!7!here)!
!
ηi δt
θit
ΔFertilityi,t ≡Fertilityi,t+1−Fertilityi,t ΔEducation
i,t−1=Education
i,t−Education
i,t−1 Δδ
t−1=δt−δ
t−1
H8!
H6!
H4!
H2!
0!
2!
4!
H0.05! 0! 0.05! 0.1! 0.15! 0.2!
Change$in$$CBR$
Lagged$change$in$education$
Tables!6!and!7!depict!the!effects!of!the!lagged!change!in!education!on!the!change!
in!the!CBR!for!1970–2010!and!1970–1990,!respectively.!The!highly!significant!effect!of!
the! lagged! change! in! education! on! the! change! in! the! CBR! holds! in! every! case! in! both!
tables,!that!is,!Tables!2!and!3.!!
!
(Insert!Table!8!here)!!
!
As! Table! 8! presents,! measuring! fertility! using! the! childHwoman! ratio! instead! of!
the!CBR!also!indicates!that!the!change!in!education!has!a!highly!significant!effect!on!the!
change!in!fertility.!!
!
4.$Conclusion$
!
The! transition! from! a! Malthusian! economy! to! a! modern! growth! economy,! first!
triggered! in! late! eighteenth! century! England,! was! one! of! the! most! significant! events! in!
human! history.! Even! though! productivity! increased! before! the! transition,! it! was!
counterbalanced! by! an! increasing! population! (Ashraf! and! Galor,! 2011).! With! the!
emergence! of! the! modern! economy,! however,! GDP! per! capita! could! now! substantially!
increase.!Unified!Growth!Theory!suggests!that!the!transition!from!stagnation!to!modern!
growth! is! associated! with! the! rise! in! the! demand! for! human! capital! in! the! course! of!
industrialization!and!its!adverse!effect!on!fertility!rates,!which!make!increasing!income!
per!capita!become!possible!(Galor,!2011,!Galor!and!Weil,!2000,!Galor!and!Moav,!2002).!!
Consistent! with! previous! empirical! finding! primarily! from! the! European!
continent,!this!paper!establishes!the!existence!of!a!quantityHquality!tradeHoff!in!Korea.!!It!
finds!that!regions!with!higher!levels!of!education!have!lower!fertility.!Using!panel!data!
spanning! 11! provinces! and! the! years! 1970! to! 2010,! and! controlled! for! unobserved!
heterogeneity,!using!a!firstHdifferencing!model,!the!study!finds!that!the!quantityHquality!
trade! off! exists! and! plays! a! crucial! role! in! Korea’s! increasing! income! per! capita! and!
economic!development.!!
Future! research! could! further! explore! the! relationship! between! demand! for!
human! capital! and! the! level! of! Korean! technological! progress.! This! analysis! could!
establish!the!virtuous!cycle!in!Korean!development!path,!where!technological!progress!
increased!the!demand!for!human!capital!and!generated!a!soaring!level!of!education!and!
a! demographic! transition.! Furthermore,! I! hope! that! the! unveiled! Korean! development!
path! will! present! important! policy! implications! for! underdeveloped! countries! still!
trapped!in!a!Malthusian!economy.!
!
References$
!
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!!!!!!!!!!!!!Economic!Review!101,!2003H41.!!
Basso,!A.,!2012,!Fertility!Transition!and!the!QuantityHQuality!TradeHOff:!!
!!!!!!!!!!!!!!Historical!Evidence!from!Spain.!(Working!paper).!Universidad!de!Alicante.!!
Becker,!G.S.,!Duesenberry,!J.S.,!Okun,!B.,!1960.!An!Economic!Analysis!of!Fertility.!NBER!
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Becker,!S.,!Cinnirella,!F.,!Woessmann,!L.,!2010.!The!tradeHoff!between!fertility!and!
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Economic!Growth!15,!177–204.!
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Galor,!O.,!Moav,!O.,!2002.!Natural!Selection!and!the!Origin!of!Economic!Growth.!!
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!
!
!
!
!
Table$1!Summary!statistics!
!
! Crude!Birth!Rate!is!the!number!of!births!per!1,000!people!per!year.!ChildHwoman!ratio!is!defined!
as! the! number! of! children! aged! 0H4! per! woman! of! childbearing! age! (15H44).! Education! is!
measured!as!the!high!school!student!ratio,!defined!as!the!number!of!high!school!student!per!the!
people! in! high! school! age! (15H19).! The! share! of! married! woman! is! defined! as! the! number! of!
married!woman!in!age!15H44!per!the!number!of!woman!in!age!15H44,!the!share!of!agriculture!is!
the! number! of! people! making! their! living! of! agriculture,! forestry! and! fisheries! per! number! of!
people!employed,!and!the!share!of!urban!measured!in!the!number!of!people!employed!in!service!
sector!per!population.!
Source:!Korean!Population!and!Housing!Census!and!Education!Statistics!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
Mean% Std.dev. Min Max
Crude%Birth%Rate 15.7564 6.7014 6.7 34.55
Child;woman%ratio 0.3766 0.1704 0.1558 0.8585
Education 0.4636 0.1390 0.1505 0.6079
Share%of%married%woman 0.5681 0.0584 0.3819 0.7014 Share%of%agriculture 0.3264 0.2352 0.0020 0.7406
Share%of%Urban 0.0775 0.0448 0.0229 0.2078
!
Table!2!The!Relationship!between!education!and!fertility!over!1970;2010!(First;differencing!Model)!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
!37.8918*** !58.5187*** !44.8540*** !45.6221*** !44.3851*** !44.1441*** !25.5423*** !27.0925*** !26.6165*** !27.1001*** !23.4707***
4.2904 8.7894 8.2499 8.3700 8.0210 7.9759 4.3425 4.6549 4.7471 4.6539 4.7710
35.5249*** 34.4878*** 38.0224*** 38.4501*** 14.3905** 8.2834 14.3854** 9.0657
9.1899 9.3314 7.8491 7.8434 6.0925 5.9272 6.3506 6.0102
!2.8670 0.8033 !15.3305 !18.4484**
2.3644 3.4311 9.5728 8.2869
!21.6762** !22.8663* !0.0510 20.3270
10.7633 13.5047 9.2311 13.1871
National5time5trend yes yes yes yes yes
Regional5linear5time5trend yes yes yes yes yes
R2 0.5325 0.7918 0.8286 0.8302 0.8387 0.8387 0.6224 0.6433 0.6916 0.6433 0.7014
observation 88 88 88 88 88 88 88 88 88 88 88
Explanatory5variables Change5in5education Change5in5married5 woman
Change5in5share5of5 agriculture
Change5in5share5of5urban
Dependent5variable:5change5in5cbr
Table!3!The!Relationship!between!education!and!fertility!over!1970;1990!(First;differencing!Model)!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
!38.8965*** !63.4733*** !43.6047*** !43.5099*** !44.6289*** !44.6214*** !31.0558*** !31.2697*** !18.7598*** !29.2295*** !19.0152***
4.6450 8.8088 8.4688 8.8911 8.7281 9.1580 7.1132 6.2804 4.1775 6.2342 4.2778
51.5131*** 52.9084*** 48.9903*** 50.2589*** 62.5890*** !14.1701 61.5847*** !15.5869
9.2092 9.9073 9.9803 10.7075 18.5965 16.7736 18.4908 17.8475
!6.3647 !6.8495 !58.2885*** !59.562***
7.5044 7.6879 7.7523 8.3144
!14.8643 !16.2376 30.7769** !7.9758
14.8237 13.7786 11.8847 11.3843
National5time5trend yes yes yes yes yes
Regional5linear5time5trend yes yes yes yes yes
R2 0.6317 0.8046 0.8577 0.8602 0.8598 0.8627 0.6794 0.7456 0.8958 0.7559 0.8964
observation 44 44 44 44 44 44 44 44 44 44 44
Change5in5education Change5in5married5 woman
Change5in5share5of5 agriculture
Change5in5share5of5urban
Explanatory5variables Dependent5variable:5change5in5cbr
Table!4!The!Relationship!between!education!and!fertility!over!1990;2010!(First;differencing!Model)!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
!25.5463** !21.1081** !22.1035*** !23.2604** !22.5524*** !22.6944** 9.1213 12.9467 !0.5602 9.6385 !4.0277
10.0949 7.8818 7.7460 9.1304 7.6010 8.5442 14.5222 18.2140 19.0650 19.3880 19.4284
4.7257 3.2283 8.2949 8.0563 !4.8794 !6.8153 !5.5244 !7.4882
6.2576 5.7537 7.6398 6.9807 5.2522 4.4623 5.4265 4.8774
!1.7092 !0.2185 !40.9974** !41.1822**
4.5191 4.2982 16.6275 15.9681
!7.4510 !7.3527 !9.6183 !9.9043
9.4946 9.2981 18.8612 18.9489
National5time5trend yes yes yes yes yes
Regional5linear5time5trend yes yes yes yes yes
R2 0.1020 0.8577 0.8598 0.8601 0.8630 0.8630 0.6451 0.6543 0.7135 0.6630 0.7227
observation 44 44 44 44 44 44 44 44 44 44 44
Change5in5education Change5in5married5 woman
Change5in5share5of5 agriculture
Change5in5share5of5urban
Explanatory5variables Dependent5variable:5change5in5cbr
Table!5!Robustness!check:!The!Relationship!between!education!and!fertility!over!1970;2010!using!child;woman!ratio!to!measure!the!fertility!(First;differencing!Model)!
!
!
!
!
!
!
!
!
!
!
!
!
!
!
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
!0.8777*** !1.0403*** !0.5399*** !0.5272*** !0.5340*** !0.5219*** !0.5471*** !0.6054*** !0.6080*** !0.5761*** !0.5769***
0.0810 0.1079 0.0889 0.0884 0.0877 0.0872 0.0921 0.0835 0.0834 0.0903 0.0902
1.3007*** 1.3176*** 1.3323*** 1.3478*** 0.5423*** 0.5911*** 0.5618*** 0.6140***
0.1325 0.1315 0.1318 0.1309 0.1209 0.1292 0.1232 0.1317
0.1322 0.1280 0.1436 0.1498
0.0817 0.0906 0.1348 0.1351
.0.2736* !0.2666* 0.1959 0.2086
0.1520 0.1506 0.2277 0.2277
National7time7trend yes yes yes yes yes
Regional7linear7time7trend yes yes yes yes yes
R2 0.5806 0.8180 0.9181 0.9207 0.9213 0.9238 0.7117 0.7721 0.7755 0.7743 0.7780
observation 88 88 88 88 88 88 88 88 88 88 88
Dependent7variable:7change7in7child.woman7ratio
Change7in7education Change7in7married7 woman
Change7in7share7of7 agriculture
Change7in7share7of7urban Explanatory7variables
Table!6!The!Relationship!between!education!and!fertility!over!1970;2010!(First;differencing!Model!with!5;years!lag)!
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!
!
!
!
!
!
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
!25.9921*** !26.4383*** !27.2200*** !28.2181*** !27.1895*** !28.1813*** !15.6149*** !15.8948*** !16.0330*** !17.6326*** !17.7369***
2.9435 3.6238 3.4328 3.6509 3.4573 4.1576 4.1698 4.1668 4.4215 4.4188
!2.0201 !3.4977 !1.8457 !3.2752 !7.9375 !11.9402 !7.5641 !11.4906
5.3976 5.1129 5.4833 5.1901 8.2196 9.0150 8.2045 9.0030
!10.1399*** !10.1664*** !7.2759 !7.1253
3.2766 3.2993 6.7697 6.7555
!1.5124 !1.9571 !13.0925 !12.8589
6.2836 5.9262 11.3092 11.3014
National5time5trend yes yes yes yes yes
Regional5linear5time5trend yes yes yes yes yes
R2 0.4788 0.8897 0.8899 0.9035 0.8900 0.9037 0.5712 0.5773 0.5848 0.5860 0.5931
observation 77 77 77 77 77 77 77 77 77 77 77
Explanatory5variables Dependent5variable:5change5in5cbr
Change5in5education Change5in5married5woman Change5in5share5of5agriculture Change5in5share5of5urban
Table!7!The!Relationship!between!education!and!fertility!over!1970;1990!(First;differencing!Model!with!5;years!lag)!
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!
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!
!
!
!
!
!
!
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
!23.5527*** !29.6308*** !24.6452*** !30.1001*** !24.2491*** !30.1759*** !34.6856** !49.6315*** !49.7014*** !49.4978*** !50.2811***
3.8203 3.5287 4.9420 3.8642 5.1015 4.0296 13.3867 13.5059 15.0868 13.7894 15.4777
11.9187 8.1019 12.8135 7.9519 56.8043** 56.6598** 56.0911*** 54.3801*
0.4108 6.3430 8.7941 6.6843 23.0511 26.6817 23.5963 27.8275
!21.4251*** !21.4782*** !0.1962 !2.2330
4.3941 4.5154 16.8533 17.9307
4.8359 !0.7595 !10.3406 !11.3086
11.5054 8.7219 26.0449 27.8188
National5time5trend yes yes yes yes yes
Regional5linear5time5trend yes yes yes yes yes
R2 0.5416 0.9124 0.9181 0.9557 0.9186 0.9557 0.5884 0.6808 0.6808 0.6833 0.6835
observation 33 33 33 33 33 33 33 33 33 33 33
Change5in5share5of5urban
Explanatory5variables Dependent5variable:5change5in5cbr
Change5in5education Change5in5married5woman Change5in5share5of5agriculture
Table!8!Robustness!check:!The!Relationship!between!education!and!fertility!over!1970;2010!using!child;woman!ratio!to!measure!the!fertility!(First;differencing!Model!
with!5;years!lag)!
!
!
!
!
!
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
!0.7343*** !1.0361*** !0.7906*** !0.7894*** !0.7833*** !0.7826*** !0.4958*** !0.4746*** !0.4868*** !0.4870*** !0.4964***
0.0693 0.1158 0.1263 0.1277 0.1247 0.1262 0.0903 0.0830 0.0676 0.0888 0.0723
0.6345*** 0.6362*** 0.6763*** 0.6772*** 0.6024*** 0.2493* 0.6051*** 0.2519*
0.1881 0.1903 0.1873 0.1894 0.1636 0.1462 0.1648 0.1473
0.0114 0.0065 !0.6418*** !0.6409***
0.1219 0.1204 0.1098 0.1105
!0.3607* !0.3604* !0.0938 !0.0728
0.2146 0.2163 0.2272 0.1849
National5time5trend yes yes yes yes yes
Regional5linear5time5trend yes yes yes yes yes
R2 0.5962 0.7572 0.7916 0.7916 0.7999 0.7999 0.6843 0.7387 0.8297 0.7394 0.8301
observation 77 77 77 77 77 77 77 77 77 77 77
Change5in5share5of5urban
Explanatory5variables Dependent5variable:5change5in5childJwoman5ratio
Change5in5education Change5in5married5woman Change5in5share5of5agriculture